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The permanent secretary agreed that cultural change is required. I therefore believe that we have the leadership in the organisation to recognise that the spending plans , the outlook that I have set out today and the requirements for reform, including doing things differently and head-count reduction, have to be delivered throughout the organisation, starting at the highest level, from the permanent secretary down. He will be working very closely with the ministerial team, including the First Minister, in delivering that.

Today, I am publishing two documents that broadly set out how public finances will be managed in the next five years—the Scottish Government’s seventh medium-term financial strategy and our first fiscal sustainability delivery plan.

Today, the Scottish Fiscal Commission is also publishing an update to its independent forecasts, which underpin the strategy and delivery plan. I thank Professor Graeme Roy and the Scottish Fiscal Commission for their flexibility in working with us.

With the world facing profound economic uncertainty, this MTFS is being presented in deeply challenging circumstances. Those challenges have been exacerbated by the actions of the United Kingdom Government, whose decisions continue to have serious consequences for the delivery of our public services. For example, the Chancellor of the Exchequer has again failed to provide full funding for the additional costs of employer national insurance contributions, leaving public services in Scotland to face a £400 million shortfall. Furthermore, had the resource funding that is provided to the Scottish Government for day-to-day priorities matched the average increase for UK departments in the UK spending review, we would have £1.1 billion more to spend in the next three years.

Last week, the UK Government set out proposals that will deliver deep cuts to disabled people’s support, which will push more people into poverty, with a real-life negative funding impact in Scotland of £440 million by 2029-30, based on the Office for Budget Responsibility’s estimates.?

Given the situation that is developing in Westminster today, how exactly the UK Government will deliver its intended changes remains to be seen but, for the purposes of today’s publications, I will be using the numbers that the Treasury gave us at the UK spring statement. For Scotland, funding from the UK Government for day-to-day spending is only expected to grow by 0.8 per cent in real terms in the next three years, compared with a 1.2 per cent average growth for UK Government departments. Scotland’s capital block grant will be 1.1 per cent lower in real terms by the end of the UK spending review period.

Those allocations simply do not reflect the unavoidable realities of the demands that will be placed on public services by the demographic challenges that we face, not least through an ageing population. On capital, construction price inflation, which has been turbocharged by Brexit, continues to drive up prices, while the necessity to maintain and invest in new assets remains.

To ensure that public services are there to meet the needs of the people, we are introducing our reform and savings plans. The UK Government is taking similar action. Indeed, the chancellor has set out the approach to achieving fiscal sustainability for the UK, with all departments to deliver at least 5 per cent savings and efficiencies by 2028-29. Within that, there are reductions in administration budgets of at least 11 per cent by 2028-29 and 16 per cent by 2029-30 in real terms. We require to take similar actions as, without our doing so, the forecast gap between funding and spending in Scotland could reach £2.6 billion for resource and £2.1 billion for capital by the financial year of 2029-30.

Managing the impact of Westminster austerity is all too familiar but, in spite of that, we continue to invest in the people of Scotland by supporting a better paid public sector, delivering high quality public services, and providing welfare support that is not available in other parts of the UK. We have done so while delivering a balanced budget every single year since 2007.

We will reform and reshape our public services, using technology to embrace and drive forward new ways of working. That shift is critical to and underpins the first pillar of our strategic approach, which is to continue to increase value for the public purse, maximising the impact that we achieve through our investment. That is why, alongside the budget in December, I will publish a multiyear Scottish spending review and an infrastructure pipeline that will set out affordable and sustainable investment plans for the years ahead. A framework for that spending review is being published in the MTFS today.

As part of the second pillar, we will deliver efficiencies. That means improving productivity and making the most of every pound of public money that is spent on delivery. We will focus on business improvement to drive down the cost of service delivery, not only in corporate functions but across the whole system—as was set out last week by the Minister for Public Finance—while protecting outcomes. Business improvement will include the sharing of services and estates across our public bodies and the driving of efficiencies from collaborative procurement across the public sector.

We will set a managed reduction target for the public sector workforce to reduce staffing levels by an average of 0.5 per cent per year until 2030. That will be achieved through reforms to our public services, as has been set out in our public service reform strategy, through natural attrition and recruitment controls. By taking that action, we will protect valuable front-line services and continue to offer a progressive pay policy that recognises that our public sector workforce is our most valuable asset.

We will focus on how to process and deliver benefits with dignity, fairness and respect, while driving important efficiency savings and ensuring that people access the support they are entitled to. We will continue our targeted programme of efficiency and productivity improvement within the national health service. We will seize the opportunities that are presented by the rise of innovation, digital and advances in treatment. We will commit to working with NHS boards and staff, ensuring that the use of core resource is optimised and that best value is secured across NHS Scotland.

As part of the third pillar, we will drive forward service reform to improve the way in which we deliver services. We must integrate support and empower the front line to bring together all the resources that people and families need to thrive. Lastly, we will focus on prevention, investing in the most impactful preventative spend to reduce demand on services in the medium to long-term. In order to improve lives, we will deliver the technical and cultural change that is needed to go further in tackling the root causes of poor outcomes. For example, through the “Best Start, Bright Futures” breakfast club delivery plan, we will continue to drive forward cross-Government action on eradicating child poverty.

Through the actions to maximise value from public spending and drive efficiency and reform that are presented in today’s delivery plan, we expect to generate total cashable savings of £2.6 billion by 2029-30. That equates to 4.4 per cent of the forecasted resource budget for that year. Growing the economy is a top priority for the Government. By boosting business activity, driving wage growth and creating employment opportunities for more people, we can broaden the tax base, alleviate pressure on public finances and generate income tax revenue to support fiscal sustainability in the medium to long term. That is the focus for the second pillar of our strategy.

Our plan for increasing Scotland’s economic activity centres on creating a dynamic and flexible business environment, improving skills provision and supporting people to secure higher paying jobs, creating opportunity for people to enter or take on more or better work, attracting investment, and promoting entrepreneurship in the industries of tomorrow. However, the levers that are available to us to stimulate economic growth are limited. For example, the UK Government’s current approach to immigration harms Scotland by failing to address our demographic and economic needs, thus exacerbating labour supply issues. Despite those constraints, this Government will continue to take action and make the most of Scotland’s strengths and opportunities to boost our long-term economic prospects.

Our overarching economic strategy sets out our vision for a fair, green and growing economy, and we are prioritising the delivery of the actions that are outlined in our programme for Government to deliver growth that will help people to enjoy more prosperous lives now and in the long term, and protect the public services that we all rely on.

The third pillar of our approach focuses on delivering a strategic approach to tax policy decisions. Despite limited tax powers, we have taken bold, necessary action in recent years to ensure that our vital public services are prioritised.

Our decisions on income tax since devolution are helping to protect investment in public services. Scottish income tax is forecast to raise a record £20.5 billion in 2025-26, with the latest SFC forecast showing a positive contribution to the 2025-26 Scottish budget of £616 million, with the total tax net position to be £2.3 billion by 2029-30.

Our delivery plan sets out further the range of actions to improve the operation and performance of the existing tax system. For example, we are implementing new devolved taxes, including the Scottish aggregates tax in 2026 and the building safety levy in 2027, and we continue to work in partnership with local government to ensure that local taxes are fair and sustainable. We will also take forward work on considering future reform to the tax system, including through developing our thinking on longer-term issues such as wealth taxation.

Fiscal sustainability is about more than balancing the books: it is about delivering value, driving reform and making strategic choices that support long-term growth. By focusing on efficient public spending, modernising services, growing our economy and taking a strategic approach to tax, we can build a stronger, fairer Scotland. Meeting the challenges that face our public finances will require a collaborative effort across the public sector and beyond any single parliamentary year.

Our strategy and action plan set out a clear path. I invite my colleagues across the chamber to work with me to deliver them and to ensure that our public finances stay on a sustainable footing.

The Department for Work and Pensions’s own impact assessment highlights that, by 2029-30, 3.2 million families will lose out as a result of those reforms. Ninety-six per cent of those families include a disabled person. The proposed changes will push a further 250,000 people, including 50,000 children, into poverty by 2029-30. The UK Government’s disability benefit reforms will reduce the block grant adjustment funding that we can expect to receive for social security benefits in 2029-30 by £440 million.

The Scottish Government will not let disabled people down or cast them aside, and we will not cut Scotland’s adult disability payment.

In response to Kenny Gibson’s final question, we will absolutely focus the reductions on back-office and corporate costs. We believe that, through reform, we can make major changes to the way that back-office and corporate functions are delivered in order to protect the front line. We want to be able to deliver our spending plans and the Government’s priorities of protecting front-line services, eradicating child poverty, growing the economy and reaching net zero by taking the action that is set out in those plans.

Kenny Gibson also mentioned capital. The capital outlook in the UK spending review is very disappointing. We will return to that through our spending review and the infrastructure investment pipeline that we will set out at the end of the year alongside the 2026-27 budget.

We continue to discuss with the Convention of Scottish Local Authorities, through the joint working group, potential reforms to local taxation. Of course, some reforms have already happened, with the additional fiscal levers that local government now has.

As I have said at committee and in the chamber, it is important to build a political consensus on what any substantial reform to council tax looks like, otherwise it will not get off first base. That remains my position in relation to not only the parties in the chamber but local government and, importantly, the public.

—but it is not okay for the Scottish Government to make reductions in corporate and admin costs to protect front-line services? Michael Marra needs to explain why it is okay for the Labour UK Government to do that but not okay for the Scottish Government to do that. We will take action on reforms and reduce corporate and back-office costs in order to protect front-line services and welfare spending—something that Michael Marra and his colleagues want to cut. We will protect the priorities of this Government, and we will let Michael Marra defend a UK Government record on disability cuts that is indefensible.

Scotland’s regional economies and regional economic partnerships are critical to growing our economy. The strategic sites programme highlights that targeted Government capital and revenue support can help to unlock those strategic sites, which is why we are funding areas such as the Granton waterfront with targeted funding to help to unlock vital investment. We will continue discussions with strategic partners, focusing on emerging business cases such as that for Blindwells, over the next months in order to develop a joint approach to facilitating the progress of these strategic sites.

Murdo Fraser forgot to mention the growth in the areas of welfare spending in which we have devolved powers, which required the establishment of Social Security Scotland.

What I have set out today is an achievable and deliverable workforce reduction plan that can be implemented in a way that focuses on back-office and corporate costs. The plan will make a sizeable contribution to the overall cost reduction that I have set out in my statement, alongside the other work that Ivan McKee set out in his statement.

We will not do what the Tories have done—put forward unaffordable proposals for £1 billion of tax cuts that they have no way of funding. [Interruption.]

Did I mishear? I thought that I had just heard Pam Duncan-Glancy talk about making good law today. She and her party are voting against the bill, are they not?

I am sure that Stephen Kerr will be on the front bench tomorrow to hear Ivan McKee’s statement on public service reform, in which he will set out the work that is already under way. It started many years ago and has been accelerated by the work of the Minister for Public Finance. Stephen Kerr will see the detail of that tomorrow, and I am sure that he will be present for it.

The Opposition is also keen to talk down the Scottish economy. Day in, day out, we hear that in this place. The reality is that the Scottish economy is one of the best performing in the UK.